30/6/04 - THE Indian Government has given a further three-month reprievefor utilisation of the zero-duty one-lakh-tonne (lt) annual vanaspatiimport quota from Nepal for 2003-04.

Simultaneously, it has made it clear that the State Trade Corporation(STC), which is the sole agency appointed to import the quota, will haveto undertake the imports by itself and not through third parties.

Under the Indo-Nepal Treaty of Trade, the Government allows duty-freeimport of up to one lt of vanaspati a year. Imports beyond this quotaattract the normal Most Favoured Nation (MFN) duty, currently 20 per cent.

For the purposes of quota entitlement, the annual time period extends fromMarch 6 of a particular calendar year to March 5 of the succeeding year.Further, the unutilised quota for a year cannot be carried forward to thesubsequent year.

By this reckoning, the current (2003-04) quota year that began on March 6,2003, would have ordinarily lapsed on March 5, 2004. But in mid-February,the Commerce Ministry allowed the zero-duty quota entitlement for 2003-04for a further three months up to June 5, 2004. Now, even this date hasbeen extended for an additional three months ending September 5, 2004.

"The time period for import of vegetable fats (vanaspati) from Nepal forthe year 2003-04 shall be extended up to September 5, 2004, and theunutilised quota shall not lapse till this date. The annual quota of100,000 mt of vegetable fats for the financial year 2004-05 from Nepalshall be permitted for import from September 6, 2004, to March 5, 2005,and thereafter no imports shall be allowed," the Directorate General ofForeign Trade (DGFT) said in a public notice issued on June 23.

However, it is a subsequent notice issued the very next day that industrysources say is more significant. The June 23 notice had stated: "STC shallbe the sole agency to monitor the import of vegetable fats from Nepal."But in the June 24 notice, the DGFT has "corrected" this to read as the"STC shall be the sole agency to make imports of vegetable fats up to theindicated quantity on annual quota basis."

The sources pointed that the clarification was in line with the orderrecently passed by a Calcutta High Court Bench restraining the STC fromimporting vanaspati from Nepal through third parties. As a matter of fact,the Court had even directed the STC to pay the regular MFN duty of 20 percent on the imports made through third parties, which it said cannot beeligible for the duty exemption under the Indo-Nepal Treaty of Trade.

At the same time, as a concession to the Nepalese industry, the Governmenthas permitted time till September 5 for exhausting the one-lt zero-dutyquota fixed for 2003-04. This is in addition to a fresh one-lt quotaentitlement for the current year, which will be accounted from September6, 2003, to March 5, 2004.

Vanaspati currently sells at around Rs 725 per 15-kg tin in the Delhimarket, which is about Rs 48,000 per tonne. Import of one lakh tonnes atzero duty would, thus, translate into a business of about Rs 480 crore.